Senate OKs payroll tax cut, huge spending bill

Washington  The Senate voted Saturday to temporarily avert a Jan. 1 payroll tax increase and benefit cutoff for the long-time unemployed, but forced a reluctant President Barack Obama to make an election-year choice between unions and environmentalists about whether to build an oil pipeline through the heart of the country.

The action set up a House vote Monday on the legislation.

With the still-reeling economy serving as a backdrop, the Senate’s 89-10 vote belied a tortuous battle between Democrats and Republicans that produced the compromise two-month extension of the expiring tax breaks and jobless benefits and forestalled cuts in doctors’ Medicare reimbursements.

It also capped a year of divided government marked by raucous partisan fights that tumbled to the brink of a first-ever U.S. default and three federal shutdowns, only to see eleventh-hour deals emerge. It also put the two sides on track to revisit the payroll tax cut early next year as the fights for control of the White House and Congress heat up.

However, House GOP leaders held a conference call Saturday with rank-and-file lawmakers in which participants said strong anger was expressed about the Senate bill, including its lack of House-approved cuts in last year’s health care overhaul law and its failure to erase the reductions in doctors’ payments for more than two months.

“You can’t have an economic recovery with this,” said Rep. Jack Kingston, R-Ga., said of the bill “If the Senate is incapable of doing that, we don’t have to accept it.”

A House GOP aide said afterward, “Members are overwhelmingly disappointed in the Senate’s decision to just ‘kick the can down the road’ for two months. No announcement was made regarding the schedule or plans.”

By 67-32, senators gave final congressional approval to a separate $1 trillion bill financing the Pentagon and scores of other federal agencies through next September. That measure avoided a shuttering of government offices that otherwise would have occurred this weekend when temporary financing expired.

The tax legislation delivers tax cuts and jobless benefits that some Republicans opposed. It also represents a rebuff of Obama’s original demands for a yearlong payroll tax reduction for 160 million workers that was to be even deeper than this year’s cut, extended to employers and paid for by boosting taxes on the highest-earning Americans.

The measure’s $33 billion price tag will be paid for instead by raising fees that government-backed Fannie Mae and Freddie Mac will charge to back new mortgages or refinancings, beginning next year. When fully phased in, those increases could cost a person with a $200,000 mortgage about $17 a month.

Despite the changes, Obama praised the Senate for passing the bill and prodded the Republican-run House to give it final approval in a vote, which has been expected early next week. He exhorted lawmakers to extend the tax cuts and jobless aid for the entire year, saying it would be “inexcusable” not to.

“It should be a formality, and hopefully it’s done with as little drama as possible when they get back in January” from their holiday recess, he said.